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Judge Rules Opt-Out Swipe Fee Lawsuits Can Proceed

July 23, 2014, 04:45 pm

BROOKLYN, N.Y. -- A federal judge ruled against Visa Inc. and MasterCard Inc. in their attempt to throw out more than 30 lawsuits filed by retailers seeking monetary damages over credit card swipe fees.

U.S. District Judge John Gleeson said his decision was "in large part driven by the requirement that I accept all well-pleaded factual allegations as true" because the cases are in the early stages of litigation. It isn't a ruling on the merits of the complaints, according to Bloomberg.

Retailers, including Target Corp. and Macy's Inc., are continuing to fight the credit card companies after opting out of a $5.7-billion settlement deal that was approved by Gleeson in December, as CSNews Online previously reported. Retailers first filed suit against Visa and MasterCard in 2005.

Gleeson also rejected Visa's request to dismiss a similar lawsuit filed by Wal-Mart Stores Inc. seeking at least $5 billion in damages. The judge revealed his decisions in federal court in Brooklyn on July 18.

In a revised complaint filed this month, Target and Macy's said the card companies "have obtained and maintained market power in the market for merchant acceptance of credit cards," causing merchants "to pay excessive interchange fees," the news outlet reported.

Wal-Mart alleged in its complaint that "Visa's monopoly power has enabled it to dictate price and inhibit competition." The Bentonville, Ark.-based retailer announced in April that MasterCard will handle its transactions for store-branded credit cards. MasterCard isn't named in Wal-Mart's swipe-fee complaint.

Visa and MasterCard, in turn, argued that the retailers' claims for damages should be barred by legal releases in an earlier settlement in 2003. They also said the claims should be thrown out because the retailers don't directly pay fees to banks that issue Visa- and MasterCard-branded cards. The fees are deducted from the payments merchants receive after processing.

Paul Cohen, a spokesman for Visa, declined to comment on the judge's rulings, according to Bloomberg.

"Judge Gleeson's ruling was at the earliest stage of the case," Seth Eisen, a spokesman for MasterCard, stated in an email. "We look forward to putting this matter behind us and continuing to work productively with the merchant community."

Separately, Gleeson also denied requests by Wal-Mart and another group of retailers to dismiss lawsuits filed against them by the card firms seeking to stop their litigation over the swipe fees. The request the card firms are making in those cases is "properly invoked," Gleeson said.